The landscape of real estate today looks increasingly diversified as new, tech-driven companies are entering the market and offering additional services to home sellers and buyers. Now, there are multiple real estate tech players—some similar, some distinct—offering something that generally hadn’t been available in real estate before: a direct sale and simplified purchase.
These PropTech companies—referred to as iBuyers due to their specialties in near on-demand, tech-enabled home buying—are known for leveraging modern tech and connectivity to buy and sell homes. These companies have launched with significant public awareness over the past five years; as they grow in volume and their footprint in the industry widens, their offerings continue to mature beyond the novelty they introduced consumers to direct home buying for ease and convenience.
A testament to their success, even industry-leading organizations like Keller Williams, are joining the movement. Consumers, investors, like-minded companies, and others are taking notice and starting to get involved to leverage the real estate tech impact that is taking shape nationwide.
Operating in Limited Markets
Though this tends to be a big news topic to industry professionals and active home sellers and buyers, the reality is that iBuying companies are currently operating within a limited number of markets around the country and now command a relatively small portion of market share within those areas of the country. Last year, iBuyers accounted for less than 1% of home transactions in the United States. The reason such a relatively small-impacting movement is getting so much attention, however, is because the real estate industry has never experienced this kind of shift before—the technological upgrade many industries have already received. Many anticipate that this express version of home selling will continue to increase significantly in popularity and value to consumers over the coming years.
Most consumers are buying or selling where iBuying capabilities are not yet available. But maybe the topic is gaining disproportionate traction beyond the number of consumers they currently serve because it has the potential to scale and secure a more significant share of the national market. The demand for the iBuyer solution is proliferating. It’s already changing the way homes are sold and purchased–even among traditional organizations.
Phoenix is iBuyer Hotspot
All the major players in this niche currently share the same 20 metro areas in the United States, where the iBuyer option is available today.
Of those
markets, Phoenix has become known as the iBuyer hot spot. It is where iBuying
began five years ago, and where consumers are most aware of this option. More than
5% of home transactions in 2018 were conducted
by iBuyer companies there. Phoenix’s housing market could also be contribu-ting
to the greater iBuyer market
share in
the metro, as well as the type of buyer in the area, and many other factors. If
time alone is the crucial element, we can expect other iBuyer markets to reach
this level of popularity within the next few years.
Consumers may wonder why these companies are all competing in the same markets, while the majority of home sellers and buyers nationwide do not yet have them as an option. As the iBuyer niche is still being refined, these organizations tend to find that specific markets are best for their services and optimized capabilities.
Advances in iBuying
The iBuyer solution provides value to consumers when they can make competitive home offers quickly and efficiently. Algorithms, numerous data points, as well as real estate expertise, determine a competitive offer. These home buyers issue competitive offers in as fast as 24 hours. When this technology was first developed, it was helpful that homes were in homogenous markets with little variety. Now that abilities in iBuying have expanded, the most successful businesses (now using local professional expertise to make home offers) can serve neighborhoods where homes are more diverse.
Still,
we see that the iBuyer offering is most heavily available in the southern parts
of the country. Generally, where companies offer the instant cash offer, there
is a substantial volume of newer home inventory—places where homes are bought
and sold frequently. These home-buying
companies tend to operate on small margins, so allocating resources in
markets where they are likely to have high volume is imperative. A critical factor in the property purchase price for these
companies is the data surrounding recent real estate activity in the
area.
It accounts for similar homes in the same
neighborhood, as that information can be used in making competitive offers.
Currently, most companies offering the iBuyer solution purchase single-family homes built after 1960 with common sizes and features that are on lots no larger than an acre.
While the parameters may seem narrow, houses with these qualities represent the majority of homes people are buying and selling today. At least for now, the iBuyer solution is focused on the most common properties to become available to as many people as possible in their markets. As this model and the capabilities of these companies have become more sophisticated, some are beginning to expand their product offerings to provide more for the general population of real estate consumers.
iBuyer Option Expanding
With the iBuyer option developing, and as participating companies continue to adapt and offer more of what consumers want, their footprints around the country will continue to grow. It’s only a matter of time before all home sellers and buyers have the option to use the innovative solutions from these real estate tech innovators, wherever they are, to enjoy more streamlined home sales and purchases that promise certainty and control.
